KYIV – The new Cabinet of Ministers that emerged in Ukraine in mid-April drew swift skepticism from Western authorities as it was cleared of foreign-born reformers, among them Finance Minister Natalie Jaresko, who was being considered to lead a technocratic government. Instead, insiders – many with shady pasts – took the reins.
“If the elites make the assumption that they could engage in political games as opposed to actually governing, that they can go slow on reform, that they don’t have to be serious about Minsk, they may find that in fact the West has turned away,” former U.S. Ambassador to Ukraine Steven Pifer told the ninth annual Kyiv Security Forum the day after the Cabinet was announced.
That turning away has already begun to occur in places like the Netherlands, where a referendum rejected integration with Ukraine; France, where the National Assembly voted to end sanctions against Russia; and even in the U.S., where the likely Republican nominee has called for a new Russia reset and even scaling down NATO.
To reverse these trends, newly appointed Prime Minister Volodymyr Groysman swung into damage control after two months of crisis that stalled reforms, taking immediate steps aimed at restoring the Western confidence needed to maintain Ukraine’s financial stability.
The first step was his April 20 announcement that he would execute the next hike in natural gas rates, which was avoided by his predecessor in March. The move was aimed at impressing the IMF in particular, which wanted evidence that the Groysman Cabinet would be committed to requirements to gain the next $1.7 billion loan tranche.
These increases are needed to bring prices up to market rates, thereby eliminating corruption through excessive government subsidies that were often exploited for corruption and theft from the state budget, according to the IMF’s logic.
To offset the resentment of the further hikes among the Ukrainian public, Mr. Groysman promised subsidies for those who couldn’t afford them.
He also claimed the Cabinet plans to submit legislation that would remove taxation from pensions (thereby raising the payments), as well as hike social payments by 10 percent in December instead of the planned 6 percent.
A second maneuver aimed at impressing the IMF involved an April 27 Cabinet decision setting a single price for natural gas for both households and industrial consumers, which took effect on May 1 along with price hikes.
“The dominant impression is that Prime Minister Groysman instantly showed that he was going to do what it takes to get the next IMF tranche,” said Dr. Anders Aslund, a resident senior fellow at the Atlantic Council.
While these fiscal maneuvers could be enough for the next IMF tranche, Western leaders expect far more reforms for further support, numerous experts said.
About $1 billion in U.S. loan guarantees is also dependent on whom Ukrainian President Petro Poroshenko will nominate as his new top prosecutor, as well as systemic reforms in the Procurator General’s Office as a whole.
The president indicated that he was leaning towards Yuriy Lutsenko, the former internal affairs minister and head of his parliamentary faction. Mr. Lutsenko is widely seen as someone who could possibly satisfy Western demands for a reformer, yet at the same time meet the president’s need for having someone under his control.
But Mr. Lutsenko told reporters in late April that he has no interest in being a “decorative prosecutor general.” Moreover, he pointed out that even if an independent prosecutor becomes approved, two newly created structures – the Qualifications-Disciplinary Commission and Prosecutors Council – will have the exclusive authority to determine personnel appointments and dismissals for all key posts.
These two bodies are being stacked with prosecutors of the old guard who have resisted reforms and prosecutions of key officials, said Vitaliy Kasko, a deputy procurator general who clashed with former Procurator General Viktor Shokin over reforms, earning the endorsement of the U.S. government.
“It’s understood that the goal of the current leadership of the Procurator General’s Office is ‘controlled prosecutorial self-governance’ that will ruin the very idea of reforming the procurator’s office,” Mr. Kasko said. “And the new procurator general, whoever he may be, will be controlled by the old prosecutorial system.”
Whether these bodies will act to obstruct reform will be demonstrated with the new prosecutor general, who will have his work cut out for him. Besides prosecuting crimes of the past (related to the Euro-Maidan and the May 2, 2015, Odesa tragedy), he will have to address the myriad corruption scandals that have surfaced on a weekly basis and involve the president and his entourage.
They include Western-backed activists alleging government pressure, if not outright persecution, such as Mr. Kasko and Vitaliy Shabunin of the Anti-Corruption Center. They also include the failure to prosecute corrupt judges, who are reportedly earning recertification under supposed lustration measures.
Scandals involving top officials – such as the February resignation of Economy Minister Aivaras Abromavicius after he alleged corruption in the president’s entourage, as well as Mr. Poroshenko’s mention in the Panama Papers – have begun to negatively affect opinions of Ukraine’s Euro-integration prospects in the West.
The Dutch public rejected the Ukraine-EU Association Agreement in an early April referendum, while the French Parliament’s lower house voted in late April for a resolution calling on its Cabinet to end sanctions against Russia.
In the U.S., Republican Party candidate Donald Trump – who has called for the U.S. to reduce support for NATO and expressed his indifference towards Ukraine’s membership – has emerged as the party’s sole candidate for the presidential nomination.
In his remarks on April 15, Mr. Pifer, a senior fellow at the Brookings Institution, warned of re-emerging “Ukraine fatigue” in the West, suggesting that the Cabinet’s first positive steps could avert that fatigue from setting in.
“At some point, you run the risk that people will come to the conclusion that Ukraine can’t be fixed. If that happens, what’s going to happen to support in America and Europe for Ukraine?” he said.
To maintain a consistent path of reform in the mid-term, the West will need to continue to rely on its current carrot-and-stick approach, rewarding the Ukrainian government with financial aid in exchange for decisions and reforms, said Serhiy Gaiday, a managing partner in the gaiday.com political consulting firm in Kyiv.
Despite the bold declaration from newly elected Verkhovna Rada Chair Andriy Parubiy that early elections won’t be held this year, parties are still preparing for that possibility given that, in the view of Mr. Gaiday, many events in the country are occurring beyond the government’s control.
Among the potential reformist parties to emerge are Mikheil Saakashvili’s Movement for Cleansing Ukraine, as well as a project being pursued by David Sakvarelidze, the former deputy procurator general who enjoys close ties to Mr. Saakashvili.
Mr. Sakvarelidze wouldn’t confirm or deny in late April whether they’d be working together, but he told reporters that Cleansing Ukraine has run its course. Meanwhile, polls show that any party associated with Mr. Saakashvili would finish in the top three in a parliamentary vote, even higher than Mr. Poroshenko’s party.
The pro-Western opposition parties – consisting of Samopomich, Batkivshchyna and Oleh Liashko’s Radical Party – have also been pressuring the government and preparing for early elections, for which they are on track to make large gains and take over the Cabinet.
In the absence of a dynamic leader leading necessary reforms, elections should be held more often in times of crisis as in Ukraine currently, said Mr. Gaiday, echoing the view of many political observers and comparing elections to metabolism of a society’s political system.
“If your metabolism simply works, your body has a chance to renew itself,” he said. “I’m asked, ‘What if worse people come to power?’ And I say something unpleasant, ‘One set of excrement is supposed to force out the other excrement.’ If this process is constant, there’s a chance that it will gradually, gradually remove the old politicians and they won’t be elected anymore.”
Another approach the West ought to consider is investing in a counter-elite to the Ukrainian oligarchy, consisting of professionals committed to reform, Mr. Gaiday said. Such individuals include Vitaliy Shabunin, Dr. Olha Bohomolets and Yegor Sobolyev, the deputy parliamentary faction head of the Self-Reliance party.
He estimated that about 50 out of the 450 current members of the Verkhovna Rada could be considered part of the counter-elite.
“There needs to be ways of financing their promotional activity and communications with the public, which is the most valuable thing in politics,” he said. “Oligarchs have television and political ads, which people like Sobolyev don’t have.”